Earth Day 2015: New U.S. Treasury Paper Builds on Momentum for Public-Private Partnerships to Address Public Infrastructure Shortfalls
The problem of aging public infrastructure in the U.S. and around the world is well recognized. For example, U.S. businesses pay $27 billion in additional freight costs because of the poor conditions of roads and other transportation infrastructure. Water systems continue to deteriorate throughout the United States, resulting in approximately 240,000 water main breaks each year with associated property damage and repair costs. The increased frequency and magnitude of extreme weather events associated with climate change puts additional strain on public infrastructure. To address these challenges, President Obama has been particularly active in this area. He launched his Build America Investment Initiative in July 2014, and, earlier this year, he proposed Qualified Public Infrastructure Bonds, among other ideas, to spur investment in public infrastructure.
Building on this momentum, on Earth Day this year, the U.S. Treasury released a White Paper titled “Expanding the Market for Infrastructure Public-Private Partnerships: Alternative Risk and Profit Sharing Approaches to Align Sponsor and Investor Interests.” The paper presents three incentive structures for public-private partnership contracts that can potentially benefit both public sector sponsors, by delivering higher quality per dollar, and private investors, by generating attractive returns. The paper also includes an overview on public-private partnership deals closed between April 2012 and April 2015, along with their incentive structure.
A lot of the exciting action on public-private partnerships to address public infrastructure shortfalls continues to happen at the city level, with significant assistance from social entrepreneurs and foundations. For example, the RE.invest Initiative, backed by re:focus partners, is a unique collaboration among eight partner cities and engineering, law, and finance firms to create new public-private partnerships for resilient infrastructure. It recently released its report, “A Roadmap for Resilience,” which details the collaboration and provides recommendations for government officials, developers, financiers, and communities engaged in investing in resilience and reinvesting in communities. Another city-focused effort is 100 Resilient Cities, backed by the Rockefeller Foundation. Cities selected for the program receive funding to hire a Chief Resilience Officer; assistance in developing a resilience strategy; and access to a platform of innovative private and public sector tools to help design and implement that strategy.